We test whether quantitative easing (QE), in addition to boosting aggregate demand and inflation via portfolio rebalancing channels, operated through a bank lending channel (BLC) in the UK. Using Bank of England data together with an instrumental variables approach, we find no evidence of a traditional BLC associated with QE. We show, in a simple framework, that the traditional BLC is diminished if the bank receives 'flighty' deposits (deposits that are likely to quickly leave the bank). We show that QE gave rise to such flighty deposits which may explain why we find no evidence of a BLC.
Nicholas Butt, Rohan Churm, Michael McMahon, Arpad Morotz, Jochen Schanz, Sunday, October 11, 2015 - 00:00
Angus Armstrong, Francesco Caselli, Jagjit Chadha, Wouter den Haan, Friday, October 23, 2015 - 00:00
Will the risk-sharing arrangements within the ECB’s quantitative easing programme reduce its effectiveness? The views of leading UK-based macroeconomists are exactly evenly divided on this question, according to the latest survey by the Centre for Macroeconomics. The responses reported in this column suggest that this divergence reflects differences in views about the channels through which quantitative easing operates.
Jens Christensen, Signe Krogstrup, Wednesday, June 10, 2015 - 00:00
Quantitative easing (QE) is thought to work by reducing expected future short-term policy rates and the supply of long-term bonds. This column argues that a third channel may be at work, namely a reserve-induced portfolio balance channel. It operates through the increase in central bank reserves on commercial banks’ balance sheets and is independent of which assets the central bank purchases. Central banks can implement QE programmes through purchases of other assets than long-term bonds and still reduce long-term yields.
Urszula Szczerbowicz, Natacha Valla, Thursday, April 9, 2015 - 00:00
Lars P Feld, Christoph M Schmidt, Isabel Schnabel, Benjamin Weigert, Volker Wieland, Friday, February 20, 2015 - 00:00
Francesco Giavazzi, Guido Tabellini, Saturday, January 17, 2015 - 00:00
Paul De Grauwe, Yuemei Ji, Thursday, January 15, 2015 - 00:00
Michael A S Joyce, Zhuoshi Liu, Ian Tonks, Saturday, January 3, 2015 - 00:00
John Muellbauer, Tuesday, December 23, 2014 - 00:00
Jean-Pierre Landau, Tuesday, December 2, 2014 - 00:00
Luis Garicano, Lucrezia Reichlin, Friday, November 14, 2014 - 00:00
Jean Pisani-Ferry, Friday, November 7, 2014 - 00:00
Biagio Bossone, Thomas Fazi, Richard Wood, Wednesday, October 1, 2014 - 00:00
Roberto Perotti, Saturday, September 13, 2014 - 00:00
Charles Wyplosz, Friday, September 12, 2014 - 00:00
Karl Walentin, Thursday, September 11, 2014 - 00:00
Marcus Miller, Lei Zhang, Wednesday, September 10, 2014 - 00:00
Francesco Giavazzi, Guido Tabellini, Thursday, August 21, 2014 - 00:00
The stagnating Eurozone economy requires policy action. This column argues that EZ leaders should agree a coordinated 5% tax cut, extension of budget deficit targets by 3 or 4 years, and issuance of long-term public debt to be purchased by the ECB without sterilisation.
Kaoru Hosono, Daisuke Miyakawa, Saturday, August 9, 2014 - 00:00
In the wake of the Global Crisis, several central banks have adopted unconventional monetary policies. This column presents new evidence from Japan on the transmission of monetary policy through banks’ balance sheets. Overall, the evidence suggests that bank net worth affects loan supply, that the effect depends on monetary policy and economic growth, and that this bank balance sheet channel has a significant impact on firms’ financing and investment. Exiting from unconventional monetary policies when bank balance sheets are weak could thus have a severe adverse impact on investment.
Martin Weale, Tomasz Wieladek, Tuesday, June 10, 2014 - 00:00
After reducing their policy rates close to zero in response to the global financial crisis, the Bank of England and the Federal Reserve began purchasing assets. This column assesses the effect of these asset purchases on output and inflation. In line with previous studies, the authors find that asset purchase announcements are associated with increases in both output and inflation in both countries. They also find that quantitative easing had a larger impact on UK inflation, which suggests that the UK Phillips curve is steeper.